no thats not really it, its due to LP VHS mode just runs the tape at half speed, and this makes the picture go soft. More video heads also helped to improve this. On DVDR/RW media, the only way to force more onto a disc is to use digital compression, which makes things look like lego blocks. You get the same effect with digital pictures if you zoom in really close on your PC screen, especially if your camera is only 5 or 6MP.
The human eye wont easily spot a soft picture, but will pick up on squares, on say peoples heads.
I point the earlier post above, the step on from VHS is a PVR, where you can record loads and loads to a hard disc drive with no added compression. DVD is still good for pre-recorded playback, but recordable dvd is only really any good for the odd few things you want to record and keep on the shelf for a long time.